ARRS Arris International Plc - Ordinary Shares

SUWANEE, Ga., April 29 /PRNewswire-FirstCall/ -- ARRIS Group, Inc. (NASDAQ:ARRS), a global technology leader in the development of advanced cable telephony, next generation high-speed data, demand driven video solutions, operations software and broadband access equipment, today announced preliminary and unaudited financial results for the first quarter 2009, which were within the revenue and earnings guidance that the Company provided on February 11, 2009. Revenues were $253.5 million as compared to first quarter 2008 revenues of $273.5 million and as compared to fourth quarter 2008 revenues of $292.4 million. Non-GAAP net income in the first quarter 2009 was $0.18 per diluted share, as compared to the first quarter 2008 of $0.12 per diluted share and the fourth quarter 2008 of $0.25 per diluted share. GAAP net income in the first quarter 2009 was $0.10 per diluted share, as compared to the first quarter 2008 net income of $0.03 per diluted share, and as compared to the fourth quarter 2008 net loss of $(1.33) per diluted share. The fourth quarter 2008 loss was primarily the result of a goodwill impairment, net of a related estimated tax benefit, of $(184.6) million, or $(1.48) per diluted share resulting from the Company's annual goodwill impairment analysis. Significant non-GAAP items in the first quarter 2009 include: amortization of intangibles, equity compensation expense, non-cash interest related to convertible debt, and a gain on the partial retirement of convertible debt. A reconciliation of non-GAAP to GAAP earnings per share is attached to this release and also can be found on the Company's website (http://www.arrisi.com/). The Company ended the first quarter 2009 with $424.4 million of cash and short-term investments, which compares to $427.3 million at the end of 2008. The Company generated approximately $13.8 million of cash from operating activities in the first quarter 2009. This amount compares to cash generated from operating activities of $30.5 million during the first quarter 2008. The Company used $10.6 million of cash to retire $15.0 million face value convertible debt in the first quarter 2009. Order backlog at the end of the first quarter 2009 was $155.0 million and the Company's book to bill ratio in the first quarter was approximately 1.16. This amount compares to order backlog of $114.8 million and book to bill ratio of 0.90 for the fourth quarter of 2008. "Although macro-economic conditions caused 2009 to start off somewhat slowly, we delivered a solid quarter with significantly higher earnings than a year ago," said Bob Stanzione, ARRIS Chairman & CEO. "During the quarter we have seen positive signs in our business that, coupled with the current plans of our customers, gives me cautious optimism that our business will gain momentum in the second quarter and beyond." During the quarter the Company announced that Japan Cablenet Limited, the second largest cable operator in Japan, will begin wide-scale deployment of a 160 Mbps Super High Speed Data service, called "Speed Star 160," across its cable system footprint using both the ARRIS C4 CMTS platform and the ARRIS DOCSIS 3.0 customer premises equipment. In addition, the Company announced the debut of the newest member of its industry-leading CMTS portfolio, the C4c(TM), a small-form factor DOCSIS 3.0-based CMTS chassis that uses existing C4(R) architecture and modules and is designed for smaller operators and for headends lacking the space or environmental capacity for a full C4(R) chassis. "We are off to a solid start to the year, particularly in light of the overall market conditions and I am pleased to see strengthening demand in the second quarter," said David Potts, ARRIS EVP & CFO. "As a result, we now project that revenues for the Company in the second quarter 2009 will be in the range of $270 to $290 million with non-GAAP net income per diluted share in the range of $0.20 to $0.24 and GAAP net income per diluted share, in the range of $0.12 to $0.16." ARRIS management will conduct a conference call at 5:00pm EDT, today, Wednesday, April 29, 2009, to discuss these results in detail. You may participate in this conference call by dialing 888-713-4215 or 617-213-4867 for international calls prior to the start of the call and providing the ARRIS Group, Inc. name, conference passcode 66272751 and Jim Bauer as the moderator. Please note that ARRIS will not accept any calls related to this earnings release until after the conclusion of the 5:00pm EDT conference call. A replay of the conference call can be accessed approximately two hours after the call through Monday, May 4, 2009 by dialing 888-286-8010 or 617-801-6888 for international calls and using the passcode 62429395. A replay also will be made available for a period of 12 months following the conference call on ARRIS' website at http://www.arrisi.com/. ARRIS is a global communications technology company specializing in the design, engineering and supply of technology supporting triple and quad-play broadband services for residential and business customers around the world. The Company supplies broadband operators with the tools and platforms they need to deliver reliable telephony, demand driven video, next-generation advertising and high-speed data services. ARRIS products expand and help grow network capacity with access and outside plant construction equipment, reliably deliver voice, video and data services and assure optimal service delivery for end customers. Headquartered in Atlanta, Georgia, USA, ARRIS has R&D centers in Atlanta; Chicago; Beaverton, Oregon; State College, Pennsylvania; Wallingford, Connecticut; Ireland and China, and operates support and sales offices throughout the world. Information about ARRIS products and services can be found at http://www.arrisi.com/. Forward-looking statements: Statements made in this press release, including those related to: -- growth expectations for 2009; -- second quarter and 2009 revenues and net income; -- expected sales levels and acceptance of certain ARRIS products; -- the general market outlook; and -- the outlook for industry trends are forward-looking statements. These statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in these statements. Among other things, -- projected results for the second quarter as well as the general outlook for 2009 and beyond are based on preliminary estimates, assumptions and projections that management believes to be reasonable at this time, but are beyond management's control; -- our customers operate in a capital intensive industry, and the current disruptions in the capital markets may adversely impact their ability to finance, and therefore purchase, the products that we offer; and -- because the market in which ARRIS operates is volatile, actions taken and contemplated may not achieve the desired impact relative to changing market conditions and the success of these strategies will be dependent on the effective implementation of those plans while minimizing organizational disruption. In addition to the factors set forth elsewhere in this release, other factors that could cause results to differ from current expectations include: the uncertain current economic climate and its impact on our customers' plans and access to capital; the impact of rapidly changing technologies; the impact of competition on product development and pricing; the ability of ARRIS to react to changes in general industry and market conditions including regulatory developments; rights to intellectual property, market trends and the adoption of industry standards; and consolidations within the telecommunications industry of both the customer and supplier base. These factors are not intended to be an all-encompassing list of risks and uncertainties that may affect the Company's business. Additional information regarding these and other factors can be found in ARRIS' reports filed with the Securities and Exchange Commission, including its Form 10-K for the year ended December 31, 2008. In providing forward-looking statements, the Company expressly disclaims any obligation to update publicly or otherwise these statements, whether as a result of new information, future events or otherwise. ARRIS GROUP, INC. PRELIMINARY CONSOLIDATED BALANCE SHEETS (in thousands) March 31, December 31, September 30, 2009 2008 2008 (unaudited) (audited) (unaudited) ----------- --------- ----------- ASSETS Current assets: Cash and cash equivalents $398,938 $409,894 $305,987 Short-term investments, at fair value 25,494 17,371 23,571 ------ ------ ------ Total cash, cash equivalents and short-term investments 424,432 427,265 329,558 Restricted cash 4,550 5,673 5,768 Accounts receivable, net 155,792 159,443 180,367 Other receivables 6,636 4,749 5,180 Inventories, net 120,774 129,752 139,598 Prepaids 6,994 8,004 5,156 Current deferred income tax assets 49,027 44,004 42,714 Other current assets 18,315 19,782 22,132 ------ ------ ------ Total current assets 786,520 798,672 730,473 Property, plant and equipment, net 59,438 59,204 60,268 Goodwill 231,684 231,684 449,418 Intangible assets, net 218,085 227,348 236,689 Investments 14,593 14,681 15,086 Noncurrent deferred income Tax assets 3,771 12,157 3,988 Other assets 5,483 6,576 7,173 ----- ----- ----- $1,319,574 $1,350,322 $1,503,095 ========== ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $44,422 $75,863 $54,304 Accrued compensation, benefits and related taxes 15,583 27,024 21,831 Accrued warranty 5,306 5,652 6,354 Deferred revenue 44,006 44,461 35,986 Current portion of long-term debt 147 146 234 Current deferred income tax liability 241 1,059 - Other accrued liabilities 31,922 25,410 30,205 ------ ------ ------ Total current liabilities 141,627 179,615 148,914 Long-term debt, net of current portion 203,080 211,870 209,340 Accrued pension 19,289 18,820 10,622 Noncurrent income tax payable 12,441 9,607 10,128 Noncurrent deferred income tax liability 42,530 41,598 67,403 Other long-term liabilities 14,391 15,343 18,088 ------ ------ ------ Total liabilities 433,358 476,853 464,495 Stockholders' equity: Preferred stock - - - Common stock 1,368 1,362 1,360 Capital in excess of par value 1,159,054 1,159,097 1,155,211 Treasury stock at cost (75,960) (75,960) (75,960) Unrealized gain (loss) on marketable securities (372) (274) (128) Unfunded pension liability (8,070) (8,070) (3,358) Accumulated deficit (189,620) (202,502) (38,341) Cumulative translation adjustments (184) (184) (184) ---- ---- ---- Total stockholders' equity 886,216 873,469 1,038,600 ------- ------- --------- $1,319,574 $1,350,322 $1,503,095 ========== ========== ========== June 30, March 31, 2008 2008 (unaudited) (unaudited) ----------- ----------- ASSETS Current assets: Cash and cash equivalents $290,266 $243,515 Short-term investments, at fair value 7,503 49,513 ----- ------ Total cash, cash equivalents and short-term investments 297,769 293,028 Restricted cash 7,051 7,186 Accounts receivable, net 178,178 172,719 Other receivables 9,067 6,074 Inventories, net 144,507 122,361 Prepaids 5,305 5,680 Current deferred income tax assets 47,412 51,993 Other current assets 18,916 10,952 ------ ------ Total current assets 708,205 669,993 Property, plant and equipment, net 60,823 60,747 Goodwill 452,398 453,454 Intangible assets, net 244,575 257,029 Investments 9,937 10,200 Noncurrent deferred income tax assets 4,256 4,430 Other assets 9,488 10,641 ----- ------ $1,489,682 $1,466,494 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $68,476 $60,490 Accrued compensation, benefits and related taxes 18,072 14,397 Accrued warranty 7,566 7,919 Deferred revenue 37,614 32,738 Current portion of long-term debt 314 310 Current deferred income tax liability - - Other accrued liabilities 26,884 32,922 ------ ------ Total current liabilities 158,926 148,776 Long-term debt, net of current portion 206,865 204,288 Accrued pension 11,362 10,905 Noncurrent income tax payable 6,250 6,487 Noncurrent deferred income tax liability 74,805 74,164 Other long-term liabilities 18,694 19,704 ------ ------ Total liabilities 476,902 464,324 Stockholders' equity: Preferred stock - - Common stock 1,358 1,357 Capital in excess of par value 1,151,680 1,148,815 Treasury stock at cost (76,007) (76,007) Unrealized gain (loss) on marketable securities 66 151 Unfunded pension liability (3,358) (3,358) Accumulated deficit (60,775) (68,604) Cumulative translation adjustments (184) (184) ---- ---- Total stockholders' equity 1,012,780 1,002,170 --------- --------- $1,489,682 $1,466,494 ========== ========== ARRIS GROUP, INC. PRELIMINARY CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) For the Three Months Ended March 31, ------------------------- 2009 2008 (unaudited) (unaudited) ----------- ----------- Net sales $253,518 $273,506 Cost of sales 158,008 188,258 ------- ------- Gross margin 95,510 85,248 Gross margin % 37.7% 31.2% Operating expenses: Selling, general, and administrative expenses 35,343 36,982 Research and development expenses 28,395 28,122 Restructuring 120 405 Amortization of intangible assets 9,263 13,254 ----- ------ 73,121 78,763 ------ ------ Operating income 22,389 6,485 Other expense (income): Interest expense 4,487 4,021 Loss on investments 297 2 Loss (gain) on foreign currency 958 (990) Interest income (385) (2,685) Gain on debt retirement (4,151) - Other (income) expense, net (103) (36) ---- --- Income from continuing operations before income taxes 21,286 6,173 Income tax expense 8,404 2,344 ----- ----- Net income $12,882 $3,829 ======= ====== Net income per common share: Basic $0.10 $0.03 ===== ===== Diluted $0.10 $0.03 ===== ===== Weighted average common shares: Basic 123,281 130,763 ======= ======= Diluted 124,920 131,981 ======= ======= ARRIS GROUP, INC. PRELIMINARY CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) For the Three Months Ended March 31, ------------------------ 2009 2008 (unaudited) (unaudited) ----------- ----------- Operating Activities: Net income $12,882 $3,829 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 4,827 4,963 Amortization of intangible assets 9,263 13,254 Stock compensation expense 3,401 2,551 Deferred income tax provision (benefit) 4,689 (6,389) Amortization of deferred finance fees 189 191 Provision for doubtful accounts 6 205 Loss on investments 297 2 Non-cash interest expense 2,818 2,605 Gain on debt retirement (4,152) - Excess tax benefits from stock-based compensation plans (431) - Changes in operating assets & liabilities, net of effects of acquisitions and disposals: Accounts receivable 3,645 (5,336) Other receivables (2,032) (1,744) Inventory 8,978 10,245 Income taxes payable (1,123) (1,734) Accounts payable and accrued liabilities (35,789) 9,300 Other, net 6,377 (1,427) ----- ------ Net cash provided by operating activities 13,845 30,515 Investing Activities: Purchases of property, plant, and equipment (5,066) (6,429) Cash paid for acquisition, net of cash acquired (200) (4,192) Cash proceeds from sale of property, plant & equipment - 224 Purchases of short-term-investments (23,870) (16,887) Disposals of short-term-investments 15,806 30,500 ------ ------ Net cash provided by (used in) investing activities (13,330) 3,216 Financing Activities: Payment of debt and capital lease obligations (10,592) (35,097) Repurchase of common stock - (75,960) Excess tax benefits from stock-based compensation plans 431 - Employer repurchase of shares to satisfy minimum tax withholdings (1,807) (239) Fees and proceeds from issuance of common stock, net 497 (2,717) --- ------ Net cash provided by (used in) financing activities (11,471) (114,013) Net increase (decrease) in cash and cash equivalents (10,956) (80,282) Cash and cash equivalents at beginning of period 409,894 323,797 ------- ------- Cash and cash equivalents at end of period $398,938 $243,515 ======== ======== ARRIS GROUP, INC. PRELIMINARY SUPPLEMENTAL NET INCOME (LOSS) RECONCILIATION (in thousands, except per share data) (unaudited) ------------------- ------------------- Q1 2009 Q1 2008 ------------------- ------------------- Per Diluted Per Diluted Amount Share Amount Share ------ ----------- ------ ----------- Net income $12,882 $0.10 $3,829 $0.03 Highlighted items: Impacting gross margin: Stock compensation expense 303 - 201 - Impacting operating expenses: Integration costs - - 427 - Restructuring charges 120 - 405 - Amortization of intangible assets 9,263 0.07 13,254 0.10 Stock compensation expense 3,098 0.02 2,350 0.02 Impacting other (income) / expense: Convertible debt non-cash interest 2,818 0.02 2,605 0.02 Gain on retirement of debt (4,152) (0.03) - - Impacting income tax expense: Adjustments of income tax valuation allowances and research & development credits and other 1,455 0.01 Tax related to highlighted items above (3,646) (0.03) (7,268) (0.06) ----- ---- ------ ---- Total highlighted items 9,259 0.07 11,974 0.09 ----- ---- ------ ---- Net income excluding highlighted items $22,141 $0.18 $15,803 $0.12 ======= ===== ======= ===== Weighted average common shares - diluted 124,920 131,981 ======= ======= With respect to stock compensation expense, ARRIS records non-cash compensation expense related to grants of options and restricted stock. Depending upon the size, timing and the terms of the grants, this non-cash compensation expense may vary significantly. With respect to amortization of intangibles, the intangibles being amortized relate to our recent acquisition of C-COR. The restructuring charge adjustments reflect items that, although they or similar items might recur, are of a nature and magnitude that identifying them separately provides investors with a greater ability to project ARRIS' future performance. With respect to the convertible debt non-cash interest, ARRIS records non-cash interest expense related to the 2013 convertible debt as a result of the adoption of FSP ABP 14-1 on January 1, 2009. Disclosing the non-cash piece provides investors with the information regarding interest that will not be paid out in cash. During the first quarter of 2009, ARRIS repurchased a portion of their convertible debt and recognized a gain of approximately $4.2 million. In the first quarter of 2009, a tax expense of approximately $1.5 million was recorded for state valuation allowances and research and development tax credits. During the first quarter of 2008, ARRIS recorded incremental costs of $0.4 million as a result of the C-COR integration. In assessing operating performance and preparing budgets and forecasts, ARRIS' management considers performance after making these adjustments and believes that providing investors with the same information provides greater transparency and insight into management's analysis. ARRIS GROUP, INC. Net Income Reconciliation (unaudited) Q2 EPS 2009 Guidance Estimated GAAP EPS - diluted $0.12 - $0.16 Reconciling Items: Amortization of intangibles, after tax 0.05 Stock compensation expense, after tax 0.02 Non-cash interest expense, after tax 0.01 ---- Subtotal 0.08 ---- Estimated adjusted (non-GAAP) EPS - diluted $0.20 - $0.24 ============= See the Supplemental Net Income Reconciliation for a discussion regarding management's reasoning for providing this non-GAAP financial measure. DATASOURCE: ARRIS Group, Inc. CONTACT: Jim Bauer, Investor Relations, ARRIS Group, Inc., +1-678-473-2647, Web Site: http://www.arrisi.com/

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